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Wednesday, November 4, 2015

They call it chutzpah, boldly going where one ought not tred, eg, outsiders trying to solve problems for others, without asking first. Here people are trying to use bitcoin technology to solve non-problems.

But the story of how goods get to the mall is decidedly less high-tech, said Gadi Ruschin, CEO of Israeli start-up Wave, which is trying to bring to the shipping industry what the digital revolution has brought to the banking and finance industry. “Shippers are still doing things the way they were done hundreds of years ago, and the reason for that is a decided lack of trust in international documentation systems.

Well, a thousand years ago, but who's counting? So note the problem they putatively solve, that trading partners cannot trust each other. What is it everyone says about int'l trade? It's all about relationships. And int'l trade law, lex mercatoria, is anarchy on paper, all good. Let's look at the solution:

“Our innovation, based on blockchain technology made famous by bitcoin, can ensure that there is no possibility of fraud or falsified documents, and enable shippers to finally enter the 21st century,” said Ruschin.

Gigo. before the problem was anyone originating fraud in the paperwork. With this we'll only have to worry about anyone originating.. wait, how is this better?

Wave was invited to be a charter member of the new Techstars-Barclays financial technology accelerator, which is set to open in Tel Aviv this month.
The system in use today by shippers harks back to the seventeenth century, when international trade started coming into its own, and hasn’t changed that much. When a wholesaler orders something from a manufacturer in China, for example, the entire transaction -sale, shipping, and delivery – is recorded on a document called a bill of lading, said Ruschin. “It is a receipt given to the sender of the goods that proves that the shipment was made, as well as proof of ownership of the goods while the goods are shipped by sea. Once the goods arrive at their destination, the sender ships the original bill of lading – usually by overnight courier – to the prospective recipient, who uses it to claim the merchandise.”

Nice summary that above, even nuanced...

If it were just a transaction between a sender and recipient, it might be possible to produce an encrypted electronic version of the document that the recipient could print out. But every international shipment involves a host of players – from banks who often front the money to pay for the goods in the form of a loan, which will be payed back when the goods are sold (in the meantime, the bank has a mortgage on those goods, pending repayment) to insurance companies who are liable if anything happens as the merchandise plies the seas (and, like the bank, has a lien on the shipment) to government customs inspectors, who need to check the goods and make sure they match up on the documentation.

So what? The present documentation suffices.

The more hands in the pie, the greater the possibility of confusion, loss and fraud, the result of which would be never-ending lawsuits as each party blames the other for negligence in the way they handled the documentation.

No. That is not a problem, the lawsuits are rare.

“There have been many attempts over the years to change things, but they all fall short in the end,” said Ruschin. “Each entity has its own record-keeping system and its own data needs, and even when systems have been put in place to streamline the process and develop an electronic method of transmitting data, they have always fallen apart because of the different systems and methods involved – as well as a lack of trust.”

This is a different problem, mere paperwork issues, nothing bitcoin can help.

Enter the blockchain – the technology that powers bitcoin, the entity-independent electronic payment system. “In a blockchain, all payments – or in our case documents – have to be approved by all parties involved, and any changes made along the way are detected immediately,” said Ruschin.

Not a solution to any known problem.

Unlike an electronic version of a document, like a PDF, which can be copied umpteen times, a blockchain-approved document is a single, one of a kind product, because it needs the electronic “signature” of everyone involved. “Since everyone is approving it, everyone can trust it,” said Ruschin. “Thus we can send a bill of lading in this manner and satisfy all the security and data issues, and eliminate the long, drawn-out process of passing the bill of lading around.

No one cares in an int'l trade transaction if the buyer and seller are happy. Done. 80% or LsC start out with problems, and they all get worked out no lawsuits. How will bitcoin solve the problem of "Garbage in, garbage out?" It won't. This is trying to solve a problem that does not exist.
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